Overall Consideration For Entire Life Of Well Finance Essay - Free Essay Example

The report gives the development scheme of the well for the recompletion process. The various possible combination are analysed based on the given recoverable volume and the cost of the crude per barrels. The well production capacity (well development option), oil processing facility, and the transportation are considered. Out of all the possibilities, a single possibility is selected which could be effective in cost, safety, and production rate. These possibilities is made for Alba offshore field, which is discovered by ECRGU Oil Company Introduction There are many oil field development options in offshore field. In this case for the alba offshore field the consideration is made for well development, oil processing and transportation The oil development is mainly to minimize the cost but not to selecting the selecting the cheapest in all possible ways. The selection should be economical, with effective selection based on the requirement. The selection is made based on two analyses Technical wise analysis (selection) Probability wise analysis (selection) Technical wise selection Technical wise selection includes the consideration of the requirement in a cost effective. In this case, we consider the cost based on life of well production rate environmental conditions mode payment There are consideration in all cases of well development, oil processing, and transportation. The known recoverable volume for the life of the well is about 36 MMBBL. 3.1 Development scheme The selection of the producing capacity is made in two different cases with either four small or with three large capacity wells. 3.1.1 Capacity case In the capacity wise analysis there are two option are available they are a) 4 small capacity and b) 3 large capacity. The selection is made based on the pumping capacity for a definite duration of time. After the pumping test, the selection is made, based on the a)production rate, b) cost, and c) the life of the well. 3.1.2 Production rate wise analysis In case of production wise analysis, large capacity wells are more effective as they can produce higher volumes of hydrocarbons in a short period of time when compared to that of the smaller capacity wells. The investment can be regained in a shorter interval of time for the larger capacity wells. 3.1.3 Cost wise analysis In cost wise, larger capacity, wells are costlier than that of the smaller capacity wells. The smaller capacity wells are preferred when the investment is less for the usage of larger capacity wells. For the Alba field the duration of production for the different capacities are as tabulated. Wells Duration for 36 mmbbl to be produced Small capacity 9 years Large capacity 6 years 3.2 Oil Processing In the oil processing case there are two possible options are available, they are selection of fixed flat form and floating vessel 3.2.1 Condition wise Condition wise includes selection based on the depth and other environmental factors. Depth is the primary factor for the selection of the options. Environmental factors include wind, snow, and hurricanes. 3.2.1.1 Permanent case (fixed) Permanent case case is the platform is fixed; here investment required is until the fixed platform is completed. This requires high initial cost. 3.2.1.2 Temporary case (floating vessel) Floating vessel is towed to different during worst weather condition. For the production vessel the production takes place eventually, the selection of floating vessel will be beneficial. As the rental, cost is only for particular period (in year, in this case). 3.2.2 Cost wise 3.2.2.1 Annual consideration (per year) The annual wise consideration will be higher for the fixed platform than that of the floating vessel 3.2.2.2 Overall consideration (for entire life of well) In this case, the overall cost of the floating vessel may be costlier than that of the fixed vessel. 3.3 Oil transportation There are two possible ways for oil transportation Shuttle tanker pipeline The oil transportation selection is done base in 3 main cases 3.3.1 Life of the well and production rate Life of the well is more dependent in selection of the transportation. If the the life of the well is less; then the pipelines are not profitable option for transportation. Pipelines are preferred only when the life of the well is longer. The selection of pipeline is also dependent on the production rate for particular duration. 3.3.2 Maintenances wise Maintenance includes consideration (clearing) the corrosion, scale and slug formation. The pipelines have higher level of possibilities for expenditures to keep the system in proper condition. Shuttle tankers have the less maintenance cost than that of the pipelines. However, the owners do the maintenance as the oil company hires the tankers. 3.3.3 Cost wise Cost wise consideration includes cost 3.3.3.1 Seasonal cost Seasonal is more preferable when the investment is is low. However seasonal are effective in managing the expenditure in a periodic manner. Second case is hiring the shuttle tanker for a period of rental cost. For pipelines, the cost has to be spent in made at a single interval during construction. 3.3.3.2 Overall cost Overall cost includes the total expenditure in the transportation for the entire transportation volume. For the transportation, there will be slight variation depending on the mode of transportation. Probability wise analysis Probability wise analysis is the analysis based on probability of different cases. Probability wise analysis includes considering all the possible outcomes. These outcomes help to select the effective method, which will be more economical. For the Alba field there are 12 possible cases. These cases can be assumed in the following flow chart Figure 1 Flow chart (showing the connectivity) Table based on the individual cost for various options: No of years Well development cost (mm$) Processing cost (mm$) Transportation cost ( mm$) Total cost ( mm$) 9 200 540 360 1100 9 200 540 340 1080 9 200 540 400 1140 9 200 720 360 1280 9 200 720 340 1260 9 200 720 400 1320 6 240 540 360 1140 6 240 540 340 1120 6 240 540 400 1180 6 240 480 360 1080 6 240 480 340 1060 6 240 480 400 1120 Table 1 individual cost The possible combinations are for development, processing, transportation are WELLS (W) PROCESSING (P) TRANSPORTATION (T) W1 P1 T1 W1 P1 T2 W1 P1 T3 W1 P2 T1 W1 P2 T2 W1 P2 T3 W2 P1 T1 W2 P1 T2 W2 P1 T3 W2 P2 T1 W2 P2 T2 W2 P2 T3 Table 2 probability cases Different cases with the cost No Cases duration in years Well development cost in mm$ Processing cost in mm$ Transportation cost in mm$ Total cost in mm$ 1 W1P1T1 9 200 540 360 1100 2 W1P1T2 9 200 540 340 1080 3 W1P1T3 9 200 540 400 1140 4 W1P2T1 9 200 720 360 1280 5 W1P2T2 9 200 720 340 1260 6 W1P2T3 9 200 720 400 1320 7 W2P1T1 6 240 540 360 1140 8 W2P1T2 6 240 540 340 1120 9 W2P1T3 6 240 540 400 1180 10 W2P2T1 6 240 480 360 1080 11 W2P2T2 6 240 480 340 1060 12 W2P2T3 6 240 480 400 1120 Table 3 case wise cost This table gives the cost in each case. The case 8 and 11 are not possible because the production rate is very high with respect to the pipe. In the overall estimation case, 8 and 11 are not considered. 4.1 The overall estimation Cases Production capacity per in MMBBL Total development cost in MM$ Average development cost per BBL Total net revenue before tax(TNRT) in million USD) Average annual net revenue before tax (million USD) W1P1T1 4 1100 30.55 1600 177.70 W1P1T2 4 1080 30.00 1620 180.00 W1P1T3 4 1140 31.66 1560 173.30 W1P2T1 4 1280 36.55 1420 157.78 W1P2T2 4 1260 35.00 1440 160.00 W1P2T3 4 1320 36.66 1380 153.30 W2P1T1 6 1140 31.66 1560 260.00 W2P1T3 6 1180 32.77 1520 253.30 W2P2T1 6 1080 30.00 1620 270.00 W2P2T3 6 1120 31.11 1580 263.30 Table 4 overall costs Only 10 are possible case are valid out of 12 probability cases. Recommendation or the best selection The selection of W2P2T1 large capacity, floating and shuttle tanker is the recommended selection as it the safest and most economical of all the cases. This is more economical from the table. In the W2P2T1 the floating vessel is taken which is more effective than the other two options. As the floating vessel can be towed to other location The selection of tankers are made W2P2T1, so that the less maintenance problem than that of the pipelines. Selection of larger capacity well is economical as the production rate is higher which can compensate the expenditure at beginning at quick interval. Conclusion The W2P2T1 (large capacity, floating and shuttle tanker is the most effective and preferable for the selection as its more economical. This selection (floating vessel)is can be optimised for the extreme weather. The shuttle tankers are efficient as they have less leakage and low maintenance cost for the owned companies the large capacity wells are helpful to manage the expenditure. Reference/Bibliography Jean Masseron.,1990. Petroleum Economics.4Th..Paris,france : OPHRYS William L. et al., 2011. Deepwater Petroleum Exploration Production: A Nontechnical Guide,Tulsa, usa: PennWell Books pennwell corporation Appendix A: Specification and formulas The total volume of crude can be produced is 36 mmbbl. The cost per each barrel to be sold =75 $.Therefore the gross revenue will be 2700 mm$ Well development option Capacity of well Capital investment $ Production rate (mmbbl) for each well 4 small (w1) 50 1 mmbbl 3 large(w2) 80 2 mmbl Processing option Type Cost ($) Fixed platform (P1) 540 Floating production vessel (P2) 80 per annum Transportation Mode Transport rate mmbbl/year Cost ($ ) Shuttle tanker(T1) independent 10 us $ per barrel Smaller pipeline(T2) 5 340 Larger pipeline(T3) 8 400 Formulas Well development cost=number of wells ÃÆ'Æ’-capital investment Processing cost=instalment cost (fixed platform ) =annual cost ÃÆ'Æ’-total no of years (floating) Transportation cost =rental cost per barrel ÃÆ'Æ’-total no of barrels (tankers) =instalment cost (pipelines) Annual Production Capacity (APC)= number of wellsÃÆ'Æ’- production capacity of well ÃÆ'Æ’-no of years of production Total Development Cost (TDC)= total cost of selected options in each case= (development cost +processing cost + transportation cost) Average Development cost per barrel of production= APC /TOTAL recoverable volume i.e.;(36 MMBBL) Total Net revenue before tax (TNRT)= Gross Revenue TDC Average annual Net Revenue before tax= (TNRT)/ 9 yrs or 6 yrs. Appendix B: calculation Case 1: W1P1T1 No of years of production =9 years Total development cost (TDC) = (4ÃÆ'Æ’-50) +540+ (36ÃÆ'Æ’-10) =1100 mm$ Average development cost=1100/36 =30.5 MM$/bbl Net revenue = Gross revenue TDC = (2700 -1100) ÃÆ'Æ’-106 =1600 mm$ Average annual net revenue = 1600 /9 MM$ = 177.7 MM$ Case 2: W1P1T2 No of years of production =9 years Total development cost (TDC) = (4ÃÆ'Æ’-50) +540+340 =1080 MM$ Average development cost=1080/36 =30 MM$/bbl Net revenue =Gross revenue-TDC =(2700 -1080) ÃÆ'Æ’-106 =1620 MM$ Average annual net revenue=1620 /9 mm$ =180 MM$ Case 3: W1P1T3 No of years of production =9 years Total development cost (TDC) = (4ÃÆ'Æ’-50) +540+400 =1140 MM$ Average development cost=1140/36 =31.6 MM$/bbl Net revenue =gross revenue-TDC =(2700 -1140 ) ÃÆ'Æ’-106 =1560 MM$ Average annual net revenue=1560 /9 mm$ =173.3 MM$ Case 4: W1P2T1 No of years of p roduction =9 years Total development cost (TDC) = (4ÃÆ'Æ’-50) + (80ÃÆ'Æ’-9) + (36ÃÆ'Æ’-10) =1280 MM$ Average development cost=1280/36 =35.5 MM$/bbl Net revenue =Gross revenue-TDC = (2700 -1280) ÃÆ'Æ’-106 =1420 MM$ Average annual net revenue=1420 /9 MM$ =15.7 MM$ Case 5: W1P2T2 No of years of production =9 years Total development cost (TDC) = (4ÃÆ'Æ’-50) +720+340 =1260 MM$ Average development cost=1260/36 =35 MM$/bbl Net revenue =gross revenue-TDC = (2700 -1260) ÃÆ'Æ’-106 =1440 MM$ Average annual net revenue=1440 /9 MM$ =160 MM$ CASE 6: W1P2T3 No of years of production =9 years Total development cost (TDC) = (4ÃÆ'Æ’-50) +720+400 =1320 MM$ Average development cost=1320/36 =36.6 MM$/bbl Net revenue =Gross revenue-TDC =2700 -1320 (106) =1380 MM$ Average annual net revenue=1380 /9 mm$ =153.3 mm$ Case 7: W2P1T1 No of years of production =6 years Total developme nt cost (TDC) = (3ÃÆ'Æ’-80) +540+360 =1140 MM$ Average development cost=1140/36 =31.6 MM$/bbl Net revenue =Gross revenue-TDC = (2700 -1140) ÃÆ'Æ’-106 =1560 MM$ Average annual net revenue=1560 /6 MM$ =260 MM$ Case 8 is not a valid selection. Case 9: W2P1T3 No of years of production =6 years Total development cost (TDC) = (3ÃÆ'Æ’-80) +540+400 =1180 MM$ Average development cost=1180/36 =32.7 MM$/bbl Net revenue =gross revenue-TDC = (2700 -1180) ÃÆ'Æ’-106 =1520 mm$ Average annual net revenue=1520 /6 MM$ =253.3 MM$ Case 10: W2P2T1 No of years of production =6 years Total development cost (TDC) = (3ÃÆ'Æ’-80) +(6ÃÆ'Æ’-8)+360 =1080 MM$ Average development cost=1080/36 =30 MM$/bbl Net revenue =gross revenue-TDC = (2700 -1080) ÃÆ'Æ’-106 =1620 mm$ Average annual net revenue=1620 /6mm$ =270 mm$ Case 11 is not a valid case. CASE 12: W1P2T3 No of years of production = 6 years Total development cost (TDC) = (3ÃÆ'Æ’-80) + (6ÃÆ'Æ’-8) +400 =1120 MM$ Average development cost=1120/36 =31.1 MM$/bbl Net revenue =Gross revenue-TDC = (2700 -1120) ÃÆ'Æ’-106 =1580 MM$ Average annual net revenue=1580 /6 MM$ =263.3 MM$